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New Banking Crisis Looms

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Yep, that is it. Odd thing for the Metro to choose for its front page

Story presumably linked to this report from a University of Durham Professor of Finance and Economics published by the Adam Smith Institute

http://www.independent.co.uk/news/business/news/bank-of-england-s-stress-tests-for-lenders-branded-worse-than-useless-a7168851.html

It doesn't really say anything that people dont already know i.e. risks of Euro implosion, property crash, doubts about quality of BOE stress testing etc, etc. Quite how you protect yourself against additional 'unforeseeable risks' the learned professor does not say.

Edited by stormymonday_2011

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Yep, that is it. Odd thing for the Metro to choose for its front page

Difficult to say. The Metro normally leads with a proper news story then has pages of guff about celebs inside like a lot of the other MSM. Given that to sustain UK property asset prices there needs to be a lot of leverage I would say UK banks are vulnerable though if there is a banking crisis I doubt if it is going to be confined to this country or that the BOE could stop it by its policy decisions alone. It would help if relentless property ramping was curbed by our central bank but as we know for most Brits it is a matter of religious faith every bit as barking and unhinged as anything spouted by Islamic jihadist loons.

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On topic HSBC profits have slumped

https://www.theguardian.com/business/2016/aug/03/hsbc-records-29-profit-slump-and-admits-compliance-issues-in-us

The Guardian article does let slip the awful truth that one of the biggest problems for banks is actually low or ZIRP interest rates which are slowly killing them as profitable businesses. As has been stated on here before the only way the weakness of the banks is going to be finally fixed is when the risk of default is properly reflected in the cost of borrowing money.

Edited by stormymonday_2011

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On topic HSBC profits have slumped

The Guardian article does let slip the awful truth that one of the biggest problems for banks is actually low or ZIRP interest rates which are slowly killing them as profitable businesses.

The Telegraph and The FT say it's all about Brexit concerns. :o

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On topic HSBC profits have slumped

https://www.theguardian.com/business/2016/aug/03/hsbc-records-29-profit-slump-and-admits-compliance-issues-in-us

The Guardian article does let slip the awful truth that one of the biggest problems for banks is actually low or ZIRP interest rates which are slowly killing them as profitable businesses. As has been stated on here before the only way the weakness of the banks is going to be finally fixed is when the risk of default is properly reflected in the cost of borrowing money.

But I thought the whole point of ZIRP was to save the banks?

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The Telegraph and The FT say it's all about Brexit concerns. :o

it had 2 quarters of slumps thats six months before the vote and there could be some lagging effect making it even longer.

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But I thought the whole point of ZIRP was to save the banks?

The Bank of England doesn't possess a zeroth order model of the economy. Without a zeroth order model of the economy it's impossible to say with confidence what the consequences of any single macroeconomic policy will be.

The evidence of history (i.e. Japan) suggests that the long-term effects of ZIRP are overwhelmingly negative.

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But I thought the whole point of ZIRP was to save the banks?

Indirectly...........if rates are low borrowers are less likely to default on their loans...........................................................................

..............but if rates were higher and borrowers didn't ever default then they would obviously make a lot more profit......

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By the time they get back to anywhere near normal interest rates there'll be few banking employees left (especially those in charge) who will remember how to do banking business with them - so they'll end up cheating and defrauding people and thieving from their customers to make ends meet. No change there then.

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I'd love to be as optimistic as you Spunko but I just can't be..., it feels like more QE and more ZIRP is just going to be keep on being used to fend off problems that could arise as a result of brexit, Italian banks, Deutsche bank etc etc

It's going to have to take one hell of a blackswan to render QE and ZIRP useless and show them up for the sticking plasters that they are.

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I don't know about anyone else but I do feel like the crash isn't that far off now.

Problem is i've felt that way for over a decade. And the best thats been served was a minor correction in 2009.

Wait and see what May/Hammonds policies are.

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I'm monitoring a wide area in NW London. Covering some of the richest and poorest post codes in country. Not seeing any appetite for beefy reductions yet. Prices are still very high across the board including all the awful stuff. The post 2012 mega bubble has added 30-40% on already inflated prices around here.

Market does not look healthy thou, new inventory coming online, feels like vendors trying to cash out quickly at peak and lots of very expensive existing stock just sitting around with miniscule reductions but still OIEO (Only Idiots Eager to Offer).

Does feel like a downturn in economy or recession would wreak absolute havoc around here.

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